The design and implementation of pro-growth and anti-poverty policies and strategies remain a major challenge in all Sub-Saharan African countries. The prevailing view among development experts is that there is no reliable alternative to economic growth, if Africa is to rise out of poverty. Economic growth reduces the levels of real unemployment and strengthens individuals’ capacity to care for themselves and their siblings. It also generates revenues necessary for anti-poverty policies. But while the engine of growth may be in the private sector, policy interventions are required to create the environment in which firms can operate and build their competitive advantages.

This article comments on the export supply response of developing countries. As developing countries are more exposed to irrecoverable entry costs in international markets their export supply response differs from that of developed countries. In developing countries the relationship between export supply and exchange rates is most likely to be persistent (path-dependent). However, the form of persistence depends on the structure of the countries’ export industry. Countries where the structure of the export industry consists of a few large firms with homogenous production technologies and equal market entry costs differ in their export persistence response compared to countries where the structure is dominated by small and medium sized enterprises with different production technologies and diverse market entry costs. In order to implement successful export promotion programmes in developing countries, a deeper understanding of differences in the structure of their export industries is necessary.

 

Key words: Developing Countries, Export Supply Response, Path-dependence.

Endogenous growth theory holds that outward oriented trade policies promote growth and better performance of economies in the medium and long-term. The theory however, emphasizes that the fundamental factors that enhance long-term growth are human resources, physical infrastructure, macroeconomic stability, the rule of law and the role of intangible inputs such as knowledge acquisition. To investigate whether available data suggest cointegration and causality among physical capital, human capital and exports in Ghana, a production function is postulated for exports. Multivariate cointegration and causality analyses were performed on variables included in the model using the Johansen (1988, 1991, and 1992) approach. The evidence suggests the variables are cointegrated with four cointegration vectors. It further suggests the existence of only one-directional causality running from exports to domestic savings. Evidence also points to significant short-run deviations. The policy implication is that to increase domestic savings, exports must increase.

Key Words: Ghana, export performance, domestic savings, foreign capital, human capital, cointegration, causality.